[Federal Register Volume 64, Number 127 (Friday, July 2, 1999)]
[Notices]
[Pages 36063-36064]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16867]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41555; File No. SR-PCX-99-16]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Pacific Exchange, Inc. Relating to the Requirement for 
Off-Floor Traders for Which the Exchange Is the Designated Examining 
Authority To Successfully Complete the General Securities 
Representative Examination Series 7

June 24. 1999.
    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 June 1, 1999, the Pacific Exchange, Inc. (``PCX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 204.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to require that qualified off-floor traders 
for which the PCX is the designated examining authority (``DEA'') 
successfully complete the General Securities Representative Examination 
Series 7 (``Series 7 Exam''). The text of the proposed rule change is 
available at the Office of the Secretary, the Exchange, and at the 
Commission.

[[Page 36064]]

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 III below and is set forth in Sections A, B, and C below.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
Series 7 Exam Requirement

    PCX Rule 1.7(b)(9) currently provides that the Exchange may deny 
(or may condition) membership, or may prevent a natural person from 
becoming associated (or may condition an association) with a member, 
when an applicant, directly or indirectly, does not successfully 
complete such written proficiency examinations as required by the 
Exchange to enable it to examine and verify the applicant's 
qualifications to function in one or more of the capacities applied 
for. The Exchange is now proposing to amend PCX Rule 1.7(b)(9) to 
expressly require designated off-floor traders to successfully complete 
the Series 7 Exam. Specifically, the proposal provides that traders of 
member organizations for which the Exchange is the DEA must 
successfully complete the Series 7 Exam if the primary business of the 
member organization involves the trading of securities which is 
unrelated to the performance of the functions of a registered 
specialist, a registered market maker or a registered floor broker. The 
proposal further provides that the following are exempt from the 
requirement to successfully complete the Series 7 Exam: Exchange 
members who perform the function of a registered specialist, registered 
market maker or registered floor broker (pursuant to PCX Rules 5.27(a), 
6.33 or 6.44, respectively) and associated persons of member firms who 
facilitate the execution of stock transactions for the accounts of 
options market makers.
    For purposes of PCX Rule 1.7(b)(9), the term ``trader'' is defined 
as a person who is directly or indirectly compensated by an Exchange 
member organization and who trades, makes trading decisions with 
respect to, or otherwise engages in the proprietary or agency trading 
of securities. In addition, the term ``primary business'' is defined as 
greater than 50% of the member organization's business. The Exchange 
notes that registered specialists, registered market makers and 
registered floor brokers are required to pass written examinations of 
the Exchange pursuant to PCS Rules 5.27(c), 6.33 and 6.44, 
respectively.\3\

    \3\ The Exchange notes that other exchanges have recently 
adopted (or have proposed to adopt) a similar Series 7 Exam 
requirement for off-floor traders. See Chicago Stock Exchange Rules, 
Art. VI, Rule 3, Interpretation and Policy .02; Securities Exchange 
Act Release No. 41306 (April 16, 1999), 64 FR 22665 (April 27, 1999) 
(notice of filing of proposed rule change of the Philadelphia Stock 
Exchange).
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Attestation Requirement

    The proposed rule change further provides that each member 
organization for which the Exchange is the DEA must complete, on an 
annual basis, and on a form prescribed by the Exchange, a written 
attestation as to whether the member organization's primary business is 
performing the function of a registered specialist, a registered market 
maker or a registered floor broker (pursuant to PCX Rules 5.27(a), 6.33 
or 6.47, respectively).

Rule Application to Current Traders

    Subsection (C) of the proposed rule provides that the requirement 
to complete the Series 7 Exam will apply to current Traders of member 
organizations that meet the criteria of subsection (A), above, as well 
as to future Traders of member organizations that meet the criteria of 
subsection (A), above, at a later date. It further provides that 
Traders of member organizations that meet the criteria of subsection 
(A), above, at the time of SEC approval of this Rule, must successfully 
complete the Series 7 Exam within six months of notification by the 
Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \4\ of the Act, in general, and further the 
objectives of Section 6(b)(5),\5\ in particular, in that it is designed 
to facilitate transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and to protect investors and the public interest.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 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 self-regulatory organization 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 20549-0609. 
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. 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-99-16 and should 
be submitted by July 23, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-16867 Filed 7-1-99; 8:45 am]
BILLING CODE 8010-01-M