[Federal Register Volume 63, Number 111 (Wednesday, June 10, 1998)]
[Notices]
[Pages 31823-31824]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-15416]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40063; File No. SR-PCX-98-21]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment 1 Thereto by the Pacific Exchange, Inc., Relating 
to Fines for Disruptive Action on the Options Floor

June 3, 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 April 16, 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 
Exchange. On May 28, 1998, the Exchange filed Amendment 1 to the 
proposal with the Commission.\3\ The Commission is publishing this 
notice to solicit comments on the proposed rule change, as amended, 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment 1 clarifies the purpose section of the filing by 
noting that fines over $2,500 are subject to higher reporting 
requirements than fines of $2,500 or less. See Letter from Michael 
D. Pierson, Senior Attorney, Regulatory Policy, PCX, to Lisa 
Henderson, Attorney, SEC, dated May 26, 1998.
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I. Self-Regulatory Organization's Statement of the Term of 
Substance of the Proposed Rule Change

    PCX is proposing to increase its recommended fines under the Minor 
Rule Plan (``MRP'') for disruptive action involving physical contact 
between members while on the options trading floor. Proposed new 
language is in italics; proposed deleted language is in brackets.

6133  Minor Rule Plan

    Rule 10.13(a)-(j)--No change.
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    \4\ Rule 19d-1(c)(2) under the Act authorizes national 
securities exchanges to adopt minor rule violation plans for the 
summary discipline and abbreviated reporting of minor rule 
violations by exchange members and member organizations. See 
Securities Exchange Act Release No. 21013 (June 1, 1984), 49 FR 
23828 (June 8, 1984) (order approving amendments to paragraph (c)(2) 
of Rule 19d-1 under the Act). Pursuant to PCX Rule 10.13, the 
Exchange may impose a fine on any 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. 
PCX Rule 10.13(h)-(j) sets forth the specific Exchange rules deemed 
to be minor in nature.
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    (k) Minor Rule Plan: Recommended Fine Schedule.
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    \5\ As noted in PCX Rule 10.13(e), pursuant to Securities 
Exchange Act Release No. 30958, any person or organization found in 
violation of a minor rule under the MRP is not required to report 
such violation on SEC Form BD, provided that the sanction imposed 
consists of a fine not exceeding $2,500 and the sanctioned person or 
organization has not sought an adjudication, including a hearing, or 
otherwise exhausted the administrative remedies available with 
respect to the matter. Accordingly, any fine imposed in excess of 
$2,500 will be subject to reporting on SEC Form BD in addition to 
the immediate, rather than periodic, reporting requirement of 
Section 19(d)(1) of the Act. See Securities Exchange Act Release No. 
32080 (January 22, 1992), 57 FR 3452 (noting that fines in excess of 
$2,500, assessed under New York Stock Exchange, Inc. (``NYSE'') Rule 
476A, are not considered pursuant to the NYSE's minor rule violation 
plan and are thus subject to the current reporting requirements of 
Section 19(d)(1) of the Act).

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                                                   Fines                
  (i) Options Floor Decorum and   --------------------------------------
  Minor Trading Rule Violations        1st          2nd          3rd    
                                    violation    violation    violation 
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1.-16. No change                                                        
17. Disruptive action involving                                         
 physician contact while on the                                         
 trading floor. (Rule 6.2).......    [$500.00]                          
                                      1,500.00  [$1,000.00]             
                                                   3,000.00  [$2,500.00]
                                                                5,000.00
18.-34. No change.                                                      
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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 Exchange 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 Exchange 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 is proposing to increase the recommended fines under 
the MRP \4\ for disruptive action involving physical contact between 
members while on PCX's Options Trading Floor. These fines are currently 
set at $500, $1,000 and $2,500 for first, second and third violations, 
respectively, during a running two-year period. The Exchange is 
proposing to increase these fines at $1,500, $3,000, and $5,000, 
respective.\5\ The purpose of the rule change is to deter future 
incidents of disruptive conduct involving physical contact. The 
Exchange notes that there has been a moderate increase recently in the 
number of such cases, and the Exchange intends that the proposed rule 
change will serve to reverse that trend.

[[Page 31824]]

2. Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act,\6\ in general, and furthers the objectives of 
Section 6(b)(5),\7\ in particular, in that it is designed to promote 
just and equitable principles of trade. In addition, the Exchange 
believes that the proposal will serve to promote fair and orderly 
markets on the Options Floor and thereby will serve to protect 
investors and the public interest.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 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 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

    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 PCX consents, the Commission will:
    (A) By order approve 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, 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 in the 
Commission's Public Reference Room, 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 PCX. All submissions should 
refer to File No. SR-PCX-98-21 and should be submitted by July 1, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-15416 Filed 6-9-98; 8:45 am]
BILLING CODE 8010-01-M