[Federal Register Volume 63, Number 50 (Monday, March 16, 1998)]
[Notices]
[Pages 12847-12851]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-6662]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39730; File No. SR-BSE-97-09]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the Boston 
Stock Exchange, Inc. Relating to its Specialist Performance Evaluation 
Program

March 6, 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 December 17, 1997, the Boston Stock Exchange, Inc. (``BSE'' 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 self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons and to 
grant accelerated approval to the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange seeks to amend its specialist performance evaluation 
program (``SPEP'') pilot with the addition of several objective 
measures, the deletion of the floor broker questionnaire, a change from 
using trade statistics to using share statistics for the price 
improvement and depth measures, a readjusted point system, readjusted 
threshold levels and/or weights for all of the measures, and a change 
in the review period for the program from tri-annual to quarterly. The 
proposed pilot program is intended to expire on December 31, 1998.\3\
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    \3\ The Commission initially approved the BSE's SPEP pilot 
program in Securities Exchange Act Release No. 22993 (March 10, 
1986), 51 FR 8298 (March 14, 1986) (File No. SR-BSE-84-04). The 
Commission subsequently extended the pilot program in Securities 
Exchange Act Release Nos. 26162 (October 6, 1988), 53 FR 40301 
(October 14, 1988) (File No. SR-BSE-87-06); 27656 (January 30, 
1990), 55 FR 4296 (February 7, 1990) (File No. SR-BSE-90-01); 28919 
(February 26, 1991), 56 FR 9990 (March 8, 1991) (File No. SR-BSE-91-
01); and 30401 (February 24, 1992), 57 FR 7413 (March 2, 1992) (File 
No. SR-BSE-92-01). The BSE was permitted to incorporate objective 
measures of specialist performance into its pilot program in 
Securities Exchange Act Release No. 31890 (February 19, 1993), 58 FR 
11647 (February 26, 1993) (File No. SR-BSE-92-04) (``February 1993 
Approval Order''), at which point the initial pilot program ceased 
to exist as a separate program. The current pilot program was 
subsequently extended in Securities Exchange Act Release Nos. 33341 
(December 15, 1993), 58 FR 67875 (December 22, 1993) (``December 
1993 Approval Order''); 35187 (December 30, 1994), 60 FR 2406 
(January 9, 1995); 36668 (January 2, 1996), 61 FR 672 (January 9, 
1996) (January 1996 Approval Order) (Pilot extended until December 
31, 1996); and 38128 (January 17, 1997), FR (January, 1997) (Pilot 
extended until December 31, 1997).
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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 III 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
    Since the inception of the pilot program in February 1993, the 
Exchange has continuously reviewed and fine-tuned the SPEP to ensure 
that its specialists are providing competitive and quality executions. 
In addition to looking for new objective measures of performance, the 
Exchange has periodically changed the threshold levels and weights of 
the existing measures. After an extensive review of overall Exchange 
performance in the areas of price improvement and depth, areas which 
the Exchange's Market Performance Committee and Board of Governors has 
determined are critical to market quality, the Exchange is proposing to 
measure price improvement in three categories covering all market 
spreads (the current program focuses only on greater than eighth 
spreads) and to heavily weight both the price improvement and depth 
measures.
    As occurs under the current program, only regular way, 
unconditioned buy and sell market and marketable limit orders will 
qualify for inclusion in the program, blocks of time will be excluded 
from the program in the event of trading halts and system problems 
which impact the validity of quotes; orders will be eligible for 
measurement only if received after the primary market opens the stock; 
stocks subject to competition will be included in the program; the same 
staff and committee review time frames and available actions will 
apply; and quarterly results will continue to be used in allocating 
stocks.
    The Exchange seeks to change the review periods from tri-annual to 
quarterly, with each period beginning January, April, July, and 
October. The Exchange believes that these shortened review periods will 
permit a more frequent review process and a faster response to evident 
performance, as well as enable specialists to address potential low 
performance areas more efficiently.
    Turnaround Time, which measures the average number of seconds from 
the receipt of an order for 1299 shares or less in BEACON until it is 
executed (in whole or in part), stopped or canceled, will remain 
unchanged. Holding Orders Without Action, which measures the percentage 
of orders (all order sizes included) which are neither executed (in 
whole or in part), stopped nor canceled within twenty-five seconds,

[[Page 12848]]

will also remain unchanged. However, the point system and weights for 
these two measures will be modified as described below.
    The existing Trading Between the Quote measure is being replaced by 
three separate price improvement measures. Each of these categories 
will measure the percentage of shares \4\ executed at a price better 
than the displayed national best bid or offer (``NBBO'') price at the 
time the order is received. A separate category of orders will be 
measures for less than one-eighth spreads, one-eighth spreads, and 
greater than one-eighth spreads. Qualification in a category will be 
based on the spread at the time the order is received.
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    \4\ The Commission notes that the current Trading Between the 
Quote criterion measures a specialist's performance in terms of 
trades, not shares.
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    The existing Executions in Size Greater than the Best Bid and Offer 
(``BBO'') is being renamed as ``Depth'' and modified to measure shares 
rather than trades. This calculation will measure the percentage of 
shares exceeding the displayed NBBO size which are executed at or 
better than the displayed NBBO price.\5\ Only orders which at the time 
of receipt exceed the displayed NBBO size will qualify for this 
measure. An additional depth measure is being added to the program, 
called ``Added Depth,'' which will measure the number of shares 
executed by each specialist at the displayed NBBO price in excess of 
the displayed NBBO size at the time the order is received, as a 
percentage of the total number of shares executed by all specialists at 
the displayed NBBO price in excess of the displayed NBBO price.\6\ This 
measure will also include only those orders that exceed the displayed 
NBBO at the time of receipt of the order, and will provide the raw 
score percentage attributable to each specialist relative to all other 
specialists being evaluated.
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    \5\ For example, assume the NBBO size is 500 shares displayed 
and the BSE specialist receives an order for 1200 shares. Under the 
current test, if the specialist executed 700 shares at the NBBO 
price, he would effectively receive credit for executing the whole 
order at the NBBO or better even though part of the order may have 
been executed at a price inferior to the NBBO. (He would receive 
credit for 1 trade out of 1 trade, or 100%). Under the proposed 
revised test, measured in terms of shares versus trades, if the 
specialist executed 600 shares at the NBBO price, the specialist 
would receive credit for 600 shares out of 1200 shares, or 50%. If 
the specialist executed 900 shares at the NBBO price, he would 
receive credit for 900 out of 1200, or 75%.
    \6\ For example assume the NBBO size is 500 shares displayed and 
the BSE specialist receives an order for 1200 shares, and that the 
specialist executes 600 shares at the displayed NBBO price. 
Calculate how many shares over the NBBO size the specialist executed 
by subtracting 500 from 600; the specialist has 100 shares of 
``added depth.'' Then calculate the added depth for each qualifying 
order for each specialist, add the added depth for each specialist 
for each qualifying order, and total the added depth for all 
specialists combined. Next, you compare each specialist's added 
depth to the overall added depth for the floor to arrive at the 
percentage for each specialist relative to the other specialists. 
For example: 100 added depth for specialist A  10,000 added 
depth for all specialists = 10% added depth for specialist A.
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    The Specialist Performance Evaluation Questionnaire (``SPEQ''), 
which has been a part of the Exchange's performance evaluation program 
since 1984, is being eliminated. For some time now, it has been the 
Market Performance Committee's and BSE staff's view that the 
Questionnaire is too subjective to have any meaningful value in the 
overall performance of a specialist. Over time, its weight has been 
significantly reduced in the overall evaluation program. The Committee 
intends to redevelop the questionnaire and reintroduce it at some point 
in the future, possibly as a tool to aid the Committee in effectively 
assessing the performance of specialists required to appear as a result 
of deficient performance in the objective measures and overall program.
    The current ten point scale that is applied to the raw scores for 
each measure is also being changed in an effort to better differentiate 
among scores. Ranges of scores will be given points of either 0, 5, 10, 
15 or 20 points, with 5 points being at the threshold level for each 
measure. Specialists who fall below the threshold level will receive 0 
points, whereas under the current scale can be given for unacceptable 
performance. The Exchange believes that these changes will provide an 
incentive to specialists to improve lower levels of performance and 
will reward those specialists who are significantly outperforming their 
peers.
    The proposed range point scales for each of the measures is as 
follows:

                           1. Turnaround Time                           
------------------------------------------------------------------------
                        Time in seconds                          Points 
------------------------------------------------------------------------
>=21.0........................................................         0
16.0-20.9.....................................................         5
11.0-15.9.....................................................        10
0-10.9........................................................        15
------------------------------------------------------------------------


                    2. Holding Orders Without Action                    
------------------------------------------------------------------------
                     Percentage of orders                        Points 
------------------------------------------------------------------------
>=21.0........................................................         0
16.0-20.9.....................................................         5
11.0-15.9.....................................................        10
6.0-10.9......................................................        15
0-5.9.........................................................        20
------------------------------------------------------------------------


                  3. Price Improvement (<\1/8\ Spreads)                 
------------------------------------------------------------------------
                     Percentage of orders                        Points 
------------------------------------------------------------------------
<2.0..........................................................         0
2.0-3.9.......................................................         5
4.0-5.9.......................................................        10
6.0-9.9.......................................................        15
>=10.0........................................................        20
------------------------------------------------------------------------


                  4. Price Improvement (\1/8\ Spreads)                  
------------------------------------------------------------------------
                     Percentage of orders                        Points 
------------------------------------------------------------------------
<15.0.........................................................         0
15.0-19.9.....................................................         5
20.0-24.9.....................................................        10
25.0-29.9.....................................................        15
>=30.0........................................................        20
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                  5. Price Improvement (>\1/8\ Spreads)                 
------------------------------------------------------------------------
                     Percentage of orders                        Points 
------------------------------------------------------------------------
<25.0.........................................................         0
25.0-34.9.....................................................         5
35.0-39.9.....................................................        10
40.0-44.9.....................................................        15
>=45.0........................................................        20
------------------------------------------------------------------------


                                6. Depth                                
------------------------------------------------------------------------
                     Percentage of orders                        Points 
------------------------------------------------------------------------
<75.0.........................................................         0
75.0-79.9.....................................................         5
80.0-84.9.....................................................        10
85.0-89.9.....................................................        15
>=90.0........................................................        20
------------------------------------------------------------------------


                             7. Added Depth                             
------------------------------------------------------------------------
                     Percentage of orders                        Points 
------------------------------------------------------------------------
<1.0..........................................................         0
1.0-1.9.......................................................         5
2.0-3.9.......................................................        10
4.0-5.9.......................................................        15
>=6.0.........................................................        20
------------------------------------------------------------------------

    The following minimum threshold levels have been set, at which a 
Specialist will be deemed to have adequately performed:

Overall Program--at or above weighted score of 5.00
Turnaround Time--below 21.0 seconds (5 points)
Holding Orders Without Action--below 21.0% (5 points)

[[Page 12849]]

Price Improvement (<\1/8\--at or above 2.0% (5 points)
Price Improvement (\1/8\)--at or above 15.0% (5 points)
Price Improvement (>\1/8\--at or above 25.0% (5 points)
Depth--at or above 75.0% (5 points)
Added Depth--at or above 1.0% (5 points)

    Assuming that a specialist performed at the above minimum threshold 
levels for each measure, the breakdown of weighted points would be as 
follows:

------------------------------------------------------------------------
                                           Weight               Weighted
                Measure                  (percent)    Points     points 
------------------------------------------------------------------------
Turnaround Time........................          5          5       0.25
Holding Orders Without Action..........          5          5       0.25
Price Improvement (<\1/8\).............         20          5       1.00
Price Improvement (\1/8\)..............         15          5       0.75
Price Improvement (>\1/8\).............         15          5       0.75
Depth..................................         20          5       1.00
Added Depth............................         20          5       1.00
                                                              ----------
      Overall Weighted Score...........  .........  .........       5.00
------------------------------------------------------------------------

    The Exchange is requesting accelerated approval of the proposed 
rule change pursuant to Section 19(b)(2) of the Act. The Exchange 
believes that such action is appropriate in that the existing 
Specialist Performance Evaluation Program's heavily weighted objective 
measure regarding price improvement in greater than one-eighth markets 
has become obsolete as the sole determinant of price improvement 
statistics. That category alone accounts for only ten percent of the 
Exchange's overall trade volume. The Exchange also believes that the 
current program's use of trade data is less effective than using share 
data will be because share data will present a better overall picture 
of execution quality. In addition, the Exchange believes that the 
proposed changes will create a more meaningful and effective overall 
program for evaluating its specialists, with the heavily weighted 
market quality measures for price improvement and depth. Finally, the 
Exchange seeks to implement this amended program as soon as possible 
and has informed its specialists that such changes have been proposed 
to the Commission for approval on an accelerated basis, and has begun 
making the system programming changes necessary to accumulate, 
calculate and store statistics for the program.
2. Statutory Basis
    The Exchange believes that the statutory basis for the proposed 
rule change is Section 6(b)(5) of the Act,\7\ in that it is designed to 
promote just and equitable principles of trade; to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities; to remove impediments to and perfect the 
mechanism of a free and open market and a national market system; and, 
in general, to protect investors and the public interest; and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers and dealers.
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    \7\ 15 USC. 78f(b)-(5).
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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.

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. 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, 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. 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-BSE-97-09 and 
should be submitted by April 6, 1998.

IV. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change

    For the reasons discussed below, the Commission finds that the 
BSE's proposal to extend the revised SPEP pilot program until December 
31, 1998 is consistent with the requirements of Sections 6 and 11 of 
the Act and the rules and regulations thereunder applicable to a 
national securities exchange. Specifically, the Commission finds that 
the proposed rule change is consistent with the Section 6(b)(5) \8\ 
requirement that the rules of the Exchange be designed to promote just 
and equitable principles of trade, to remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and, in general, to protect investors and the public interest.
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    \8\ 15 U.S.C. 78f(b)(5).
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    Further, the Commission finds that the proposal is consistent with 
Section 11(b) of the Act \9\ and Rule 11b-1 thereunder \10\ which allow 
securities exchanges to promulgate rules relating to specialists in 
order to maintain fair and orderly markets and to remove impediments to 
and perfect the mechanism of a national market system.
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    \9\ 15 U.S.C. 78k(b).
    \10\ 17 CFR 240.11b-1.
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    The Commission believes that specialists play a crucial role in 
providing stability, liquidity, and continuity to the trading of 
stocks. Among the obligations imposed upon specialists by the Exchange, 
and by the Act and the rules promulgated thereunder, is the maintenance 
of fair and orderly markets in their designated securities.\11\ To 
ensure that specialists fulfill these obligations, it is important that 
the Exchange conduct effective

[[Page 12850]]

oversight of their performance. The BSE's SPEP is critical to this 
oversight.
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    \11\ Rule 11b-1, 17 CFR 240.11b-1; BSE Rules Ch. XV, para. 
2155.01.
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    The Commission believes that the Exchange's development of two new 
objective criteria, Price Improvement and Added Depth, is a positive 
step forward in establishing meaningful objective specialist 
performance criteria. These new objective measures are designed to 
measure market quality in two important areas of specialist 
performance, price improvement and depth. By replacing Trading Between 
the Quote with Price Improvement, the amount of time the specialist 
executes orders at a price better than the NBBO \12\ will be measured 
in three categories covering all market spreads, rather than just in 
greater than \1/8\th markets. The Added Depth measure will allow BSE to 
measure in percentage terms, how often a specialist executes an order 
at a size greater than the NBBO size, at the NBBO price, relative to 
all the other specialists. In addition, the Commission believes it is 
reasonable to measure Price Improvement and Depth and Added Depth in 
terms of shares executed, rather than trades, because it should give a 
better picture of a specialist's execution quality by giving 
specialists credit for the number of shares in a trade actually 
executed above the NBBO size at the NBBO price, rather than for an 
entire trade where the specialist may have only executed part of the 
trade at or better than the NBBO price.\13\
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    \12\ In Trading Between the Quote, the performance was measured 
against BSE's BBO rather than the NBBO.
    \13\ See supra example note 5. In that example, under the 
current regime, a specialist who executed 600 out of the 1200 shares 
would receive the same credit as one who executes 800 out of 1200. 
However, under the proposed rule change, the specialist who executed 
800 shares would receive a higher score than the one who executes 
600 shares.
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    The Commission believes it is reasonable under the Act to amend the 
point system for all of the objective measures of specialist 
performance. The Commission believes that the revised test, where 
specialists who fall below the adequate threshold levels will not 
receive any points, as compared to the current scale where points are 
still awarded for performance below the adequate threshold level, 
should provide an added incentive to specialists to receive partial 
credit for unacceptable performance. Regarding BSE's proposed reliance 
on share statistics (versus trade statistics), the Commission believes 
that the threshold levels set for each objective measure are 
reasonable. The Commission nevertheless reiterates its previous request 
that BSE continually monitor the adequate threshold levels and propose 
adjustments as necessary. The Commission also believes that the change 
in the weighting of each objective measure is reasonable, in that the 
Price Improvement and depth measures, which measure market quality and 
liquidity, are more highly weighted than Turnaround Time and Holding 
Orders Without Action, which have been reduced to 10% combined weight. 
The Commission believes it is reasonable for BSE to eliminate the 
current SPEQ, a subjective measure of specialist performance, 
particularly given the breadth of the proposed performance measures, 
which rely on objective criteria. The Commission also believes it is 
consistent with the Act to allow the Exchange to review the specialist 
performance quarterly, rather than tri-annually. By allowing for more 
frequent review of specialist performance, BSE should be able to 
respond more rapidly and efficiently in order to identify deficient 
performance by specialists.
    Extending the pilot program until December 31, 1998 will allow the 
Exchange to gain experience in administering the new specialist 
performance program and provide sufficient time for BSE to respond to 
the Commission's continuing concerns about the SPEP. In particular, the 
Commission expects the BSE to incorporate additional objective criteria 
into the SPEP, most importantly, a measure of quote performance \14\ 
The Commission recently observed, in its study on the practice of 
preferencing, that BSE specialists' quotes are only equal to the NBBO a 
very low percentage of the time.\15\ In response to a request from the 
Division of Market Regulation to address the issue of measuring 
specialist quote performance, BSE has stated that it is currently 
developing the technological means to evaluate quote performance and 
will submit a rule amendment in September 1998 modifying its SPEP to 
include an objective measure of quote performance.\16\
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    \14\ For example, the BSE could develop additional measures of 
market depth, such as how often the specialist's quote exceeds 500 
shares or how often the BSE quote, in size, is larger than the NBBO 
(excluding quotes for 100 shares). Another possible objective 
criteria could measure quote performance; how often the BSE 
specialist's quote, in price, is alone at or the same as the NBBO. 
See January 1996 Approval Order.
    \15\ See Report on the Practice of Preferencing Pursuant to 
Section 510(c) of the National Securities Markets Improvement Act of 
1996, Commission, April 11, 1997 at Table V-5 (BSE specialists' 
quotes are equal to the NBBO approximately only 5% of the time).
    \16\ See letter from Karen A. Aluise, Vice President, BSE, to 
Howard Kramer, Associate Director, Market Regulation, Commission, 
dated February 13, 1998.
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    During the next year of the pilot's operation, BSE should continue 
to assess whether each SPEP measure is assigned an appropriate 
weight.\17\ In addition, the Commission expects the Exchange to 
continue to conduct an on-going examination of its minimum adequate 
performance thresholds, in order to ensure that they continue to be set 
at appropriate levels.\18\ The Commission notes its continued belief 
that relative performance rankings that subject the bottom 10% of all 
specialist units to review by an Exchange committee are important part 
of an effective evaluation program. The BSE should continue to closely 
monitor the conditions for review and should take steps to ensure that 
all specialists whose performance is deficient and/or diverges widely 
from the best units will be subject to meaningful review. In the 
Commission's opinion, a meaningful review process would ensure that 
adequate corrective actions are taken with respect to each deficient 
specialist.\19\ The Commission would have difficulty granting permanent 
approval to a SPEP that did not include a satisfactory response to the 
concerns described above.
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    \17\ The Commission had recommended in its January 1996 Approval 
Order that the BSE consider either having only one measure out of 
the Turnaround Time and Holding Orders Without Action categories or 
reducing the weights of these existing measures, which together 
accounted for 30% of the current SPEP, given the substantial overlap 
between those two measures. In response to this recommendation, the 
BSE first reduced the weights of two measures to 25% of the overall 
program, and decreased the weight of the SPEQ to 5% and increasing 
the weight of each of the other objective criteria from 25% to 35%. 
See August 1996 Release. In addition, the current proposed rule 
change further reduces the weights of the two measures to 5% each.
    \18\ In August 1996, in response to this same recommendation the 
BSE some of the minimum adequate performance levels to provide a 
higher benchmark for acceptable specialist performance on the 
Exchange. See August 1996 Release.
    In the current proposed rule change, BSE has further amended the 
performance level of price improvement (which replaces Trading 
Between the Quote) and the two depth measures by slightly lowering 
them, to reflect the change from measuring performance in terms of 
trades to shares.
    \19\ In response to these comments, the BSE previously revised 
its review process by tightening the standards for committee review 
for substandard specialist performance both in the overall program 
and in individual measures. The criteria for PIAC review for 
substandard performance in any one objective measure was reduced 
from two out of three consecutive review periods to any one review 
period. The crieteria for MPC review of substandard performance in 
any one objective measure was reduced from three out of four 
consecutive review periods to two out of three consecutive review 
periods, while MPC review for substandard overall performance was 
reduced from two out of three consecutive review periods to any one 
review period. See August 1996 Release.
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    The Commission therefore requests that the BSE submit a report to 
the

[[Page 12851]]

Commission, by September 17, 1998, describing its experience with the 
pilot. At a minimum, this report should contain data, for the last 
review period of 1997 and the first two review periods of 1998, on (1) 
the number of specialists who fell below acceptable levels of 
performances for each objective measure, \20\ the questionnaire (for 
the last review period of 1997) and the overall program, and the 
specific measures in which each such specialist was deficient; (2) the 
number of specialists who, as a result of the objective measures, 
appeared before the PIAC for informal counseling; (3) the number of 
such specialists then referred to the MPC and the type of action taken; 
(4) the number of specialists who, as a result of the overall program, 
appeared before the MPC and the type of action taken; (5) the number of 
specialists who, as a result of the questionnaire (for the last review 
period of 1997) or falling in the bottom 10% were referred by the 
Exchange staff to the PIAC and the type of action taken (this should 
include the number of specialists then referred to the MPC and the type 
of action taken by that Committee); and (6) a list of stocks 
reallocated due to substandard performance and the particular unit 
involved. The report also should discuss the specific action taken by 
the BSE to develop additional objective measures and address the other 
concerns noted above. Any requests to modify this pilot, to extend its 
effectiveness or to seek permanent approval for the SPEP should be 
submitted to the Commission by September 17, 1998, as a proposed rule 
change pursuant to Section 19(b) of the Act.
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    \20\ For objective measure, the Commission also requests that 
the BSE provide the mean and median scores.
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice thereof in the Federal Register. This will permit the pilot 
program to continue and allow the BSE time to consider improvements to 
its program. In addition, the rule change that implemented the pilot 
program was published in the Federal Register for the full comment 
period, and no comments were received.\21\ Accordingly, the Commission 
believes that it is consistent with the Act to accelerate approval of 
the proposed rule change.
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    \21\ See February 1993 Approval Order, supra note 4.
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    It is therefore ordered, pursuant to Section 19(b)(2) \22\ that the 
proposed rule change is hereby approved on an accelerated basis, 
through December 31, 1998.

    \22\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-6662 Filed 3-13-98; 8:45 am]
BILLING CODE 8010-01-M