[Federal Register Volume 64, Number 4 (Thursday, January 7, 1999)]
[Notices]
[Pages 1041-1042]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-308]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40844; File No. SR-BSE-98-07]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Amendment No. 2 to a Proposed Rule 
Change by the Boston Stock Exchange, Inc. Relating to Its Specialist 
Performance Evaluation Program

December 28, 1998.

I. Introduction

    On October 8, 1998, the Boston Stock Exchange, Inc. (``BSE'' Or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend the depth measure calculations in its 
Specialist Performance Evaluation Program (``SPEP'') pilot program and 
to seek permanent approval of the program at the expiration of the 
pilot on December 31, 1998. The Exchange submitted to the Commission

[[Page 1042]]

Amendment No. 1 to its proposed rule change on November 13, 1998.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Rule 19b-4 filing, SR-BSE-98-07, dated November 6, 1998 
(``Amendment No. 1'').
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    The proposed rule change and Amendment No. 1 were published for 
comment in the Federal Register on December 11, 1998.\4\ On December 
17, 1998, the BSE submitted Amendment No. 2 to the proposed rule 
change.\5\ This order approves Amendment No. 2, which extends the SPEP 
pilot for a six-month period ending on June 30, 1999, or until the 
Commission approves the proposal seeking to amend the program and to 
make the program permanent, whichever occurs first.
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    \4\ Securities Exchange Act Release No. 40746 (Dec. 3, 1998), 63 
FR 68490 (Dec. 11, 1998).
    \5\ In Amendment No. 2, the Exchange (1) requested an extension 
of the SPEP program for a six-month period ending on June 30, 1999, 
or until the Commission approves the Exchange's proposal to revise 
the SPEP and to make it permanent,whichever occurs first, and (2) 
made a technical change to its rule.
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Background

    The Exchange regularly evaluates the performance of its specialists 
under the SPEP pilot program. Under the SPEP pilot, specialists are 
evaluated based on objective measures, such as turnaround time, price 
improvements, depth and added depth. Generally, any specialist who 
receives a deficient score in one or more objective measures may be 
required to attend a meeting with the Performance Improvement Action 
Committee or the Market Performance Committee.
    The Exchange has submitted a proposal seeking to amend its SPEP 
pilot by modifying the two depth measure calculations and the overall 
program score. In addition, the Exchange is requesting permanent 
approval of the program, which is set to expire on December 31, 1998. 
The Commission is currently in the process of reviewing the Exchange's 
proposal seeking to amend and permanently approve the SPEP pilot.

II. Description

    In the current amendment, the Exchange is proposing to extend the 
SPEP pilot for a six-month period ending on June 30, 1999, or until the 
Commission approves the proposal seeking to amend the program and have 
it approved permanently, whichever occurs first. The proposed rule 
language, as amended, follows. Deletions are bracketed.

Chapter XV

Specialists

Specialist Performance Valuation Program 

* * * * *
    Sec. 17(a) [The Specialist Performance Evaluation Program is a 12-
month pilot program.]

III. Discussion

    The Commission finds that the BSE's proposal to extend the SPEP 
pilot program until June 30, 1999, or until the Commission approves the 
proposal seeking to amend the program and to make the program 
permanent, whichever occurs first, is consistent with the requirements 
of the Act and the rules and regulation thereunder. Specifically, the 
Commission finds that the amendment is consistent with Section 6(b)(5) 
of the Act,\6\ which requires that the rules of the Exchange be 
designed to promote just and equitable principles of trade, 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. The Commission believes that the proposed six-month 
extension of the pilot program should continue to provide necessary 
oversight of Exchange specialist while allowing the Commission adequate 
time to consider the BSE's proposal seeking to amend its two depth 
measure calculations and to make its program permanent.
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    \6\ 15 U.S.C. 78f(b)(5).
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    The Commission finds good cause for granting the Exchanges' request 
for a six-month extension of the SPEP pilot prior to the thirtieth day 
after the date of publication of notice of filing thereof in the 
Federal Register. 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 securities. To ensure 
that specialists fulfill these obligations, it is important that the 
Exchange conduct effective oversight of their performance. The BSE's 
SPEP pilot is critical to this oversight. Therefore, the Commission 
believes good cause exists to approve the extension of the pilot 
program until June 30, 1999, or until the Commission approves the 
Exchange's proposal seeking to amend its two depth measure calculation 
and to make its program permanent, on an accelerated basis. 
Accordingly, the Commission believes that granting accelerated approval 
of the requested extension is appropriate and consistent with Sections 
6(b)(5) and 19(b)(2) of the Act.\7\
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    \7\ 15 U.S.C. 78f(b)(5) and 78s(b)(2).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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 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 at the Commission's Public Reference Room, 450 Fifth Street, 
N.W., Washington, D.C. 20549. Copies of such filings will also be 
available for inspection and copying at the principal offices of the 
Exchanges. All submissions should refer to File No. SR-BSE-98-07 and 
should be submitted by January 28, 1999.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that Amendment No. 2 to the proposed rule change, SR-BSE-98-07, 
which extends the SPEP pilot until June 30, 1999, or until the 
Commission approves the proposal seeking to amend the program and to 
make the program permanent, whichever occurs first, is approved.\9\

    \8\ 15 U.S.C. 78s(b)(2).
    \9\ In approving Amendment No. 2, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.303(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-308 Filed 1-6-99; 8:45 am]
BILLING CODE 8010-01-M