[Federal Register Volume 64, Number 213 (Thursday, November 4, 1999)]
[Notices]
[Pages 60259-60260]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-28873]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42068; File No. SR-PCX-99-40]


Self-Regulatory Organizations; Notice of Filing of a Proposed 
Rule Change by the Pacific Exchange, Inc. Relating to Order Book 
Officials

October 28, 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 October 8, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The PCX proposes to modify its rules pertaining to the Exchange's 
Order Book Officials (``OBO'') on the Options Trading Floor by 
clarifying existing provisions, eliminating superfluous provisions, 
incorporating current policies and procedures, and deleting certain 
Option Floor Procedure Advices (``OFPAs'') and incorporating relevant 
language from the OFPAs into the text of PCX Rule 6. The text of the 
proposed rule change is available at the Office of the Secretary, the 
PCX, and at the Commission.

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 proposes to amend PCX Rule 6 (``Options Trading--Rules 
Principally Applicable to Trading of Options Contracts''). 
Specifically, the Exchange proposes to delete the following OFPs: OFPA 
E-2, Subject: Posting of Market Maker Assignments; OFPA A-4, Subject: 
Timeliness of Entering Orders in the Book: OFPA B-7, Subject: Issuing a 
Call for Market Makers and; OFPA G-4, Subject: Transactions Following a 
Change in the Status of Orders in the Book. The Exchange proposes to 
delete these OFPAs and to incorporate the relevant language from them 
into the text of PCX Rule 6. The Exchange believes this will centralize 
the rules and obligations of OBOs.
    The Exchange proposes to add the language of OFPA E-2, regarding 
the posting of Market Maker assignments, to PCX Rule 6.51(b). The 
proposal requires that a list of Market Makers holding primary 
appointments in a particular issue be maintained by the OBO at each 
trading post where the issue is traded. The Exchange proposes this rule 
change to clarify and centralize the responsibilities of the OBO and to 
simplify the process of posting Market Maker assignments. The Exchange 
proposes to require the OBO to maintain the list of Market Makers 
holding primary appointments in a particular issue, instead of the 
Options Floor Manager in cooperation with the Options Appointment 
Committee, currently required in OFPA E-2, because the Exchange 
believes that the OBO will be able to maintain such list more easily 
and quickly.
    The Exchange proposes to add the language from OFPA A-4, regarding 
the timeliness of entering orders in the Book, to PCX Rule 6.52(c). The 
proposal requires that OBOs report to Floor Officials, instead of the 
Option Floor Trading Committee, any instances that appear to violate a 
Floor Brokers' obligation to ensure that the urgency of the need to 
deal with the Book at a given moment is consistent with the maintenance 
of a fair and orderly Book market. The Exchange proposes this change 
because more immediate action may be necessary and can be taken if 
reported to Floor Official on the Floor when such a violation occurs.
    The Exchange proposes to eliminate unnecessary and superfluous 
language in PCX Rule 6.52, Commentary .01, which states that ``[a]s of 
the effective date of these Rules, the Committee has not designated any 
additional types of orders that may be accepted by Order Book 
Officials.'' The Exchange believes this language is unnecessary given 
that Commentary .01 states that ``an Order Book Official may only 
accept such other types of orders that have been designated by the 
Options Floor Trading Committee.''
    The Exchange proposes to change the reference in PCX Rule 6.53 From 
``Department of Member Firms'' to ``Options Surveillance Department'' 
to reflect the current practice regarding where copies of recodes are 
sent.
    To replace of OFPA B-7, regarding when a call for Market Makers is 
issued, the Exchange proposes to add Commentary .01 to PCX Rule 6.53. 
Specifically, the Exchange proposes that OBOs should have the 
responsibility for issuing a call for Markers Makers to come to 
specified post. Only the OBO may cause this call to be made. In 
addition, the Exchange proposes that a call for Market Makers be made 
only after it has been determined that those Market Makers present at 
the post are not carrying out the functions of Markers as stipulated in 
PCX Rule 6.37, and not only on the basis of the number of Market Makers 
present at the post.
    The Exchange also proposes that if as few as two Market Makers are 
present and the OBO determines that an orderly market is being 
maintained with respect to quote and size, then a call will not be 
issued merely to bring more Market Makers to the post. However, the 
provision is not in any way to be taken as limitation on the 
responsibilities of the OBO to issue such calls for Market Makers as 
may be necessary to implement the full requirements of PCX Rule 6.37. 
The Exchange proposes this rule change to centralize OBO obligations 
regarding the issuing of a call for Market Makers to come to a post in 
the text of PCX Rule 6.
    Finally, the Exchange proposes to clarify language in PCX Rule 6.56 
regarding the term ``displayed'' as currently stated in OFPA G-4, 
Subject: Transactions Following a Change in the Status of Orders in the 
Book. Specifically, the Exchange proposes to define the term 
``displayed,'' as used in PCX Rule 6.56 to include either verbally made 
known a new bid or offer or having entered the new bid or offer on the 
quotation screen. The Exchange proposes this rule change to centralize

[[Page 60260]]

OBO obligations regarding the treatment of transactions outside of the 
OBO's last quoted range.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b)(5) of the Act \3\ because 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, and in general, to protect investors and the public 
interest.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will impose no 
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 were not solicited or received with respect to the 
proposed rule change.

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 the 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, N.W., Washington, D.C. 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 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-PCX-99-40 and 
should be submitted by November 26, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\4\
---------------------------------------------------------------------------

    \4\ 17 CFR 200.30-3(a)(12)
---------------------------------------------------------------------------

[FR Doc. 99-28873 Filed 11-3-99; 8:45 am]
BILLING CODE 8010-01-M