[Federal Register Volume 65, Number 63 (Friday, March 31, 2000)]
[Notices]
[Pages 17329-17330]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-7977]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42577; File No. SR-PCX-00-2]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the Pacific 
Exchange, Inc. Relating to Communications With Customers and Members of 
the Public

March 27, 2000.
    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 February 11, 2000, the Pacific Exchange, Inc. (``PCX'' 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 Exchange. On March 8, 
2000, the PCX filed Amendment No. 1 to the proposed rule change.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons and to approve the 
proposal on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, PCX requested that the Commission grant 
accelerated approval to the proposed rule change. See letter from 
Robert P. Pacileo, Staff Attorney, Regulatory Policy, PCX, to 
Richard Strasser, Assistant Director, Division of Market Regulation 
(``Division''), Commission, dated March 7, 2000. The PCX also 
changed Exhibit 1 of the proposed rule change to reflect the request 
for accelerated approval. See e-mail from Robert P. Pacileo, Staff 
Attorney, Regulatory Policy, PCX, to Joseph P. Corcoran, Attorney, 
Division, Commission, on March 16, 2000.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The PCX proposes to allow members, member organizations, and 
associated persons to distribute more than one type of options 
worksheet to customers or members of the public. The text of the 
proposed rule change is available at the Office of the Secretary, CBOE 
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 PCX 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 PCX 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 9.28 (``Advertisements, 
Market Letters and Sales Literature Relating to Options'') to allow 
members, member organizations, and associated persons to distribute to 
customers or members of the public more than one type of options 
worksheet to indicate possible outcomes under various market 
conditions. The proposed rule change: (i) Incorporates worksheets into 
the definition of ``sales literature'' and establishes that worksheets 
must comply with the requirements applicable to sales literature; (ii) 
adds references to members and associated persons; (iii) deletes 
references to ``standard'' worksheets and deletes prohibitions on 
``nonstandard'' worksheets; and (iv) deletes the requirement that 
worksheets must be uniform within a member organization for each 
product type. These changes are discussed below.
    First, the Exchange proposes to remove the word ``standard'' from 
PCX Rule 9.28(e)(ii) to incorporate all worksheets communicated to 
customers or the public into the definition of `sales literature.'' 
Under rule 9.28(e)(ii), these worksheets are defined as sales 
literature and must comply with the requirements applicable to sales 
literature.
    Second, the Exchange proposes to modify PCX Rule 9.28, Commentary 
.03(E) to require that any (not just standard form) options worksheets 
must comply with the requirements applicable to sales literature. Under 
the current rule, once a member organization adopts a ``standard'' 
worksheet for a particular options strategy or product type (e.g., 
equities, foreign currencies, indexes, etc.), it may only distribute 
that standard worksheet to a client, and may not illustrate different 
market conditions through other worksheets.
    Third, the Exchange proposes to add references to members and 
associated persons to PCX Rule 9.28, Commentary .03(E) to clarify that 
members and associated persons, and not just member organizations, are 
responsible for utilizing worksheets that comply with requirements 
applicable to sales literature. Fourth, the Exchange proposes to delete 
PCX Rule 9.28, Commentary .03(F), which requires that member 
organizations use a standard form of worksheet for a particular options 
strategy, to make the Exchange's rules consistent with this proposal. 
Finally, the Exchange proposes to renumber PCX Rule 9.28, Commentary 
.03(G) as new PCX Rule 9.28, Commentary .03(F).
    The Exchange believes that the proposed rule change will allow 
members, member organizations, and associated persons to use Exchange 
or industry-produced worksheets or to tailor worksheets to specific 
clientele. The Exchange believes the proposed rule change also ensures 
that when

[[Page 17330]]

members, member organizations, and associated persons use options 
worksheets, all such worksheets will comply with the requirements 
applicable to sales literature.\4\
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    \4\ See Exchange Rule 9.28.
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    In addition, the Exchange believes that the proposed rule change 
will improve the quality of options worksheets that customers or 
members of the public receive from members, member organizations, and 
associated persons.The Exchange also believes that the proposed rule 
change should enhance members' ability to describe properly the risks 
and benefits of options trading, and should enhance the ability of 
customers or members of the public to understand these risks and 
benefits.
2. Statutory Basis
    The exchange believes that the proposal is consistent with Section 
6(b) \5\ of the Act, in general, and further the objectives of Section 
6(b)(5),\6\ in particular, in that it is designed to facilitate 
transactions in securities and remove impediments to and perfect the 
mechanism of a free and open market and national market system, and to 
protect investors and the public interest by allowing the distribution 
of worksheets that are tailored for specific options strategies.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
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-00-02 and should be 
submitted by April 21, 2000.

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

    After careful review, the Commission finds that the proposal is 
consistent with the requirements of the Act.\7\ In particular, the 
Commission finds the proposal is consistent with Section 6(b)(5) \8\ of 
the Act. Section 6(b)(5) requires, among other things, that the rules 
of an exchange be designed to promote just and equitable principles of 
trade and to protect investors and the public interest.
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    \7\ In addition, pursuant to Section 3(f) of the Act, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposal is consistent with the 
Act because it provides flexibility to PCX member firms while still 
providing for investor protection. In particular, the proposal provides 
flexibility to PCX members and their associated persons by allowing 
them to create options worksheets that match the investment objectives 
of their clients. At the same time, however, the proposal provides for 
investor protection by continuing the requirement that a registered 
options principal first approve the worksheet before its use.
    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. The Commission approved a 
virtually identical proposal by the Chicago Board Options Exchange 
(``CBOE''), SR-CBOE-99-27.\9\ This proposal was published in the 
Federal Register for the full 21-day comment period and the Commission 
received no public comments.\10\ The current proposal follows the 
changes approved in SR-CBOE-99-27. The Commission believes, therefore, 
that granting accelerated approval to the proposed rule change is 
appropriate and consistent with Section 6 \11\ of the Act.
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    \9\ See Release No. 34-42443 (February 18, 2000), 65 FR 10574 
(February 28, 1999) (order approving SR-CBOE-99-27.)
    \10\ See Release No. 34-42186 (November 30, 1999), 64 FR 68707 
(December 8, 1999) (notice of filing of SR-CBOE-99-27.)
    \11\ 15 U.S.C. 78f.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-PCX-00-02), as amended, is 
hereby approved.
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    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-7977 Filed 3-30-00; 8:45 am]
BILLING CODE 8010-01-M